HUL overtakes ITC in terms of market cap after 13 years

Shares of Hindustan Unilever Ltd (HUL) rose after the company reported better-than expected volume growth for the March quarter (Q4). Photo: Pradeep Gaur/Mint

Mumbai: After 13 years, Hindustan Unilever Ltd (HUL) on Thursday reclaimed the spot of India’s most-valued consumer packaged goods maker, edging past ITC Ltd which has held that position all this while.

Shares of HUL, India’s largest consumer-goods company by sales, rose after the company reported better-than expected volume growth for the March quarter (Q4).

BSE data as of 2.45 pm on Thursday showed HUL has market cap of Rs343,164.39 crore after its stock rose to a record high of Rs1,594, up 1.4% from its previous close. Since start of January, it has gained 15%.

ITC’s market cap stood at Rs342,452.52 crore. Its shares were down 1.8% on Thursday to Rs280.75 a share. So far this year, ITC has surged 21%.

ITC has held the position of India’s biggest FMCG company by market cap since February 2005.

HUL reported a net profit of Rs1,351 crore in the January-March quarter, against Rs1,183 crore a year ago. Sales at Rs9,003 crore were up 2.5% from Rs8,773 crore a year ago. A Bloomberg poll of 21 analysts had estimated the company to post a fourth quarter profit at Rs1,333 crore and revenues at Rs8,898.40 crore.

The company attributed the performance to trade conditions that have normalised after the debut of goods and service tax (GST) and higher consumption.

Sales growth was driven by underlying volume growth of 11%. In the year-ago quarter as well, volume growth was 11%, but then the base for the company in the earlier December quarter had contracted by 4% due to demonetisation.

“The volume growth has surpassed all expectations with mature categories like home delivering very strong double digit volume growth. While the sustenance of such high volume growth seems challenging but considering low base for the next two quarters HUL volume growth trajectory will continue to be very strong,” said PhillipCapital in a note to its investors.

“We have upgraded our estimates for FY19/FY20 on improving volume growth prospects. Because of its robust distribution model and wide product portfolio, HUVR is best-placed to harness growth arising from the informal sector becoming formal. With strong volume and value growth, it will trade at premium valuations”, the report added. The brokerage firm has maintained a buy rating on the stock and increased its target price to Rs1,670 from Rs1,585 a share.

ITC on Wednesday said its net profit in the March quarter rose 9.86% from a year ago to Rs2,932.71 crore as margins expanded. Gross revenue from sales rose only 3.56% to Rs17,933.48 crore, which the company attributed to subdued demand and disruptions in supply chain.

The cigarette segment contributed Rs3,505.76 crore of pre-tax profit compared with Rs3,258.76 crore, up 7.57% year-on-year. According to Edelweiss, cigarette sales by volume were down 1-2% y-o-y in the March quarter. In the December quarter too, cigarette sales by volume had contracted by an estimated 5%

“ITC’s core cigarette segment continues to witness pressures on volume growth following the price hikes taken by the company (to offset GST-related hikes). The company continues to be largely dependent on cigarettes for its profits; thus growth will remain muted until volumes revive. Other segments of the company are yet to show traction that may aid the company beat estimates. As such, our expectations from the company in terms of profit growth remains contained,” said Kotak Securities in a note to its investors.